Management Contracting Procurement

Question 1

What is management contracting procurement?

Answer 1

• The employer appoints a management contractor to manage the entire building process who in turn appoints trade contractors to carry out the works.
• The management contractor is usually paid a fee percentage based on construction cost.
• The management contractor has a direct contractual link with the trade contractors and is responsible for the overall construction works.

Question 2

What are the key advantages of management contracting?

Answer 2

• Overall project duration can be reduced by overlapping design and construction.
• The management contractor will provide buildability input.
• Single point responsibility with the management contractor.
• Trade packages are let competitively and transparently.
• There can be considerable flexibility in the design with changes being made throughout the construction process.

Question 3

What are the key disadvantages of management contracting?

Answer 3

• Price certainty is not achieved until the last trade package is let.
• Requires and informed and proactive employer to be successful.
• Depending on how the construction manager is remunerated, there may be a built in disincentive for the construction manager to minimise costs.

Question 4

When might management contracting be appropriate?

Answer 4

• When an early start on site is a priority.
• Flexibility in design is required.
• Buildability input from management contractor is required.
• Where cost certainty is not a priority for the employer.

Question 5

What is the key difference between management contracting and construction management?

Answer 5

• Construction management: the employer directly appoints multiple trade contractors to execute the works.
• Management contracting: the employer appoints a management contractor who in turn appoints the works contractors.